SINOPEC Engineering (Group) (HKG:2386) Has Announced A Dividend Of CN¥0.176

SINOPEC Engineering (Group) Co., Ltd. (HKG:2386) has announced that it will pay a dividend of CN¥0.176 per share on the 27th of October. This makes the dividend yield about the same as the industry average at 5.6%.

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SINOPEC Engineering (Group)'s Projected Earnings Seem Likely To Cover Future Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last dividend was quite easily covered by SINOPEC Engineering (Group)'s earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 21.4%. If the dividend continues on this path, the payout ratio could be 60% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for SINOPEC Engineering (Group)

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2015, the dividend has gone from CN¥0.312 total annually to CN¥0.358. This works out to be a compound annual growth rate (CAGR) of approximately 1.4% a year over that time. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

SINOPEC Engineering (Group) May Find It Hard To Grow The Dividend

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. However, SINOPEC Engineering (Group) has only grown its earnings per share at 2.6% per annum over the past five years. SINOPEC Engineering (Group) is struggling to find viable investments, so it is returning more to shareholders. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

Our Thoughts On SINOPEC Engineering (Group)'s Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for SINOPEC Engineering (Group) that you should be aware of before investing. Is SINOPEC Engineering (Group) not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.